Wednesday, July 23, 2014

Entrepreneurship in traditional
legal systems in India are often ‘non-existent’, even if we count the role of
law firms or legal consultants, and debarring some very good legal journalism
sprouting every now and then. However, from a citizen’s point of view or rather
from a consumer’s point of view I just see the concrete in the pillars of
justices; from the Supreme Court to lower courts. There was an emerging class
of people, mostly lawyers who ‘fixed things’, a plumber like activity which,
however with increasing leakages. They earned the tag of ‘settlement lawyers’
who over the years got overshadowed by the ‘administrative courts’, and an
unhappy litigant who flew out of the country to seek justice. The concept of
courts and justice have become stagnant (even some lawyers say that law has
become stagnant thanks to the precedents!). There has been no innovation which
has bettered the system to the benefit of its users, the litigants. Alternative
Dispute Resolutions (ADR) mechanisms have started functioning as an extension
of courts. Specialised professionals have not been able to contribute much to
this.

The question is ‘Whether citizens
have a choice of forums?’ or an opportunity to seek redressal without going to
the courts. I am not talking about the Mafioso or the underworld gang’s and
their ‘unjudicial behaviour’. I am talking about fixing issues or settling
disputes at the preliminary level. Here again I am talking about simple issues
which are given a topping by smart lawyers through complex use of legal
language. This case is made out in relation to consumer issues; which have a
set of consumer forums and systems from bottom to top. Just imagine when your
phone goes out or your SIM recharge didn’t work. We don’t call the lawyer, even
if he is your close friend (and hungry). You get custom replies through the
service provider’s customer service. Going by the latest TRAI Report on Consumer
Grievance Redressal Report; even the most horrible customer service does not
perform very badly. Taking cue from this; can we think of similar centres to
help the citizens becoming a potential litigant? The Gram Nyayalaya was a good
idea but bad in implementation. It should have been outsourced it to someone!

Majority of the issues that hit
the consumer courts are those relating to bad service, defects of goods which
are largely fixed by the companies who provide the service or manufacture the
product. The latest statistics mention that defective products constitute the
worst offence (21.3 percent) with Banking the worst offender (16.3 percent). The
consumer law has really matured to give them legal protection; but is still
wanting in giving them ‘access to justice’. Service delivery mechanisms of
government, especially at the local self government level have been suffering
all these maladies. Since they are supposed to directly interact with the
people; the impact of their activities is directly felt on them. Electricity,
water, roads etc. can only progress through better grievance redressal
mechanisms, than shying away from responsibility. Few states have enacted Right
to Service Act which will be a game-changer if implemented in the right sense.
But from various reports, it still follows the same route.

Issues to ponder

1) Number of courts - As per
latest figures there are just 632 District Consumer Forums in India, which
means one for every 20 lakh population 2) Time - Consumer case disposal in
India stands at a good percent of 87 percent. However, the issue is the delay.
The mandated time for disposal is 90 days for district courts and 150 days at
state level as per Consumer Protection Act, 1986. Just 6 percent and 38 percent
in district and state forums were disposed within this time. 3) Awareness - 70
percent of people in India are unaware of Consumer Rights (ASSOCHAM Social
Development Foundation (ASDF), 2014). Approximately Rupees 3 is spend per
person for Consumer Awareness in India as per 12th Plan Allocation for Jago Grahak
Jago; the campaign which costs Rupees 409 Crore. 4) Access - The consumer
forums don’t come to the aggrieved; you need to go there. Sounds genuine from a
legal perspective; however the cost is high if one believes in the ‘idea of
justice’. Not what Amartya Sen propounds but in the context of ‘justice to
all’. What is the cost per litigant to approach the court? The argument that
Supreme Court is inundated with Delhi litigants supports a rationale argument
on proximity of courts.

Now I bring the entrepreneurship element in
here. I would dream about start-ups vying each other to develop solutions for
legal issues in India. It can be a mobile app to any high end tool which will
enable one to dissect and treat disputes of the people. Don’t get me wrong
here. It’s impossible to replace fellow lawyers and judges. It’s all about
improving the mechanisms and systems which are more effective and efficient. We
are far behind; or rather the judicial system has lagged behind when others
have atleast jumped into the technology wagon. Other than a very low
user-friendly court information system for providing causelist of the cases and
judgment reports which you need to be lucky to get the right one, has not
progressed much. M.J Antony in Business Standard had emphasized the horrible
nature of court websites which are totally useless for a common man. Forget
about those consumers who want to know about their rights or the laws existing.
There is so much opportunities and lot to be covered. Our brother China has
developed systems wherein the Higher Court judges can get the entire story
behind the case before him in his screen; reducing wastage of time and ensuring
quickness in action. Of course I don’t neglect the fact that judges need to be
smart! The strategy should be to enable swiftness in action and precision in
purpose which can happen only if we develop more ideas and innovate on
solutions available for legal or judicial systems.

There have been some worthwhile attempts in consumer
complaints redressal from private initiatives on public service systems. One of
the impressive platforms is Akosha who had raised funds from Sequoia capital
and Morpheus which has around 7 lakh complaints filed with 61 percent resolved.
Another one is Consumer Complaints- Indian Consumer Complaints Forum in
addition to the Core Centre run by the Ministry of Consumer Affairs which fails
to impress. Such online initiatives will make a difference in the coming years
as internet penetration increases. The idea behind such initiatives is to pool
those disgruntled consumers and effectively pressurize companies to solve it or
face it! Even those remarks on products and services in facebook pages or
tweets have been seriously noted by companies to act swift before it jolts into
a bigger issue, affecting its brand value. This is the power of technology and
media! Just imagine if one post “We are celebrating our 3rd
Anniversary. Still hasn’t got my marriage registration certificate”, on
facebook, poking fun on the registration department for not issuing the
certificate. Will anything happen? Of course you will get lot many likes and
many sharing their disappointments or happiness! But the issue is still
unresolved. Imagine what if IT Department of the Municipal Corporation traces
the post via a developed algorithm to identify the person, cross check the
issue and remedy it. Wouldn’t it be great!. Of course we have the technology’
but do we have the will? Look at the available mechanisms for registering
consumer complaints; the National Consumer Helpline Number 1800-11-4000. The
more you try to call on this number; the more aggrieved and frustrated you
become. I often wonder why we have multiple helpline numbers (many of them not
working). Can’t we have a single number system which integrates all services
instead of forcing us to be a mathematical genius in numbers!! The Jansuvidha
programme of Ahmedabad Municipal Corporation tried to work out an integrated
system by providing a helpline for consumers under its jurisdiction. It was a
good attempt and fairly successful but still needs improvement. With government
investing huge money on e-governance initiatives I believe they have understood
the importance; but have not been able to translate into action. It is here we
need to utilize the services of entrepreneurs, NGO’s, companies who can connect
with the consumers and assist in these process. Let the Jago Grahak Jago run
with all their support.

Solutions

The solution lies in different channels. One
important thing is to reduce issues turning into disputes. The difference lies
in intervention before the court process shall step in.

For consumer related issues; better service and customer management would reduce the percentage of complaints by a huge margin. The government should invest more on improving their service delivery than on campaigns.

Introducing Rating systems for products and services would help to measure and improve quality. This of course shall need proper Enforcement/Regulation.

Seek redressal locally and improving access to justice shall be a further step.

Use technology in bridging consumers and minimize risks. Interconnectedness helps in effective resolution by quickening the process, bring transparency and minimize the cost.

These suggestions need further focus to really
shape into practical solutions which can work for everyone alike. Opening the
judicial and legal system is inevitable. We need professionals in court
management, case management and even documentation. Judges shall be assisted by
a team of such professionals who can support legal research, help them in their
duty and facilitate the judicial process. Let Judicial Impact Assessments be
carried out in a transparent manner through use of technology. Let the people
really connect with the judicial system and remove the fear of the courts.
These measures will enable in achieving ‘justice’. Let’s do justice for all!

Monday, July 21, 2014

Does a tax on cigarettes serve
any purpose? For a layman seeing the budget figures of a very high excise rate
on cigarettes would mean that it indeed makes the stick costlier and would lead
to a reduction in its usage. However, there are some crucial figures on smoking
and the usage of tobacco which could paint a picture more nuanced than a
layman’s observation. This picture also allows us to critically understand
policy measures of the federal government. Here the federal budget 2014-15
provides us with this platform.

Does an excise increase matter? Costs, benefits and the illegal.

An excise taxes on the stick is
likely to have little or no implications in terms of revenue generation (at
least to sponsor health expenditure or to provide a source for funding
big-budget expenditure) save for the cost burden passed on to the consumers of
cigarettes. If that discourages them from smoking then well and good. The
reason is simple and has often been cited. The Public Health Foundation of
India estimated the economic cost of smoking at several lakh crores of Rupees
and the direct cost to be approximately Rupees 16,000 crore. The expected tax
gains of approximately Rupees 4,000 crore, from the excise hike, is nothing
compared to the budget expenditure of approximately Rupees 18 lakh crores nor sufficient
to cover the direct economic cost of smoking. The huge unregistered market for
tobacco and intoxicants would just feel relieved following these hikes since it
is more likely that people (not all, but at least a few) would shift to these
substitutes. The above tax affects the registered legal part of the industry.
But what about the unregistered sector and of course the no-smoke versions of
tobacco? Unregistered cultivation of tobacco is prevalent in India. Tobacco
Atlas by the World Lung Foundation in 2012 showed that out of the 35 per cent
(approximately 275 million) adult population in India who uses tobacco a large
number of users (164 million) use smokeless tobacco. Beedi and smokeless tobacco
constitute 81 per cent of the total consumption. And of course there is a huge
risk factor in consuming tobacco. The expected deaths by the year 2030 is 8
million. [1]
But strictly speaking majority of this consumption falls outside the new excise
structure.

How could the state be responsible?

To make the federal state accountable
and responsible for these taxes it should be accompanied by a suitable reform
to implement a well-defined objective (say for instance to promote health). The
question is how much of these taxes reduce consumption and encourage a
healthier life. For one thing, such a reason (to promote health) by increasing
the tax rates is highly debatable. The argument is that any excise duty change
is likely to influence only the dominant industries in the market; majority of
the consumers would resort to other options and the federal and state
governments does not yet have a catastrophic situation facing them due to
smoking. This would then go on to suggest that the state should not remain a
passive observer after the tariff hike; rather it should actively get involved
in drafting and implementing a policy and a regulatory apparatus on handling
the large illegal market for tobacco in India. Now the market response to this hike in the
budget and post-budget sessions were different. Major tobacco producer Indian
Tobacco Company (ITC) found that the hike helped them compete much with the
other industry players.[2]
The Cigarette industry in India is an oligopoly dominated by ITC, Godfrey
Phillips India (GPI) and Vazir Sultan Tobacco Company (VST). VST in which
production is dominated by micro filters is likely to be most influenced most
by these taxes. Foreign firms have a significant presence in these industries
and their responses would depend on their shares. Continuous price rise
following excise hikes in each budgets and additional Value Added Tax (VAT) by
the federal states have promised a bleak picture for the industry. But not for
the people, nor for the state. But yet nobody is interested in banning
cigarettes; the reason might be that the externalities of smoke affect only
people within a specific radius. Very few people would get irritated or
concerned seeing a person smoke half a mile away (until of course you are
allergic to the sight of smoke); and very few cares whether that person would
die of smoking. And some others would say that this is much better than the
soot filled smokes from our public transport vehicles. But a tax on smoking is
likely to tickle one of our nerves awake and make us think and respond like a
good citizen. A non-smoker would feel proud of the fact that the federal state
is aware and concerned of our health; and it would be much appreciable that a
health expenditure etc. of the citizens are kept in check. But here again no
one knows for sure how much of the total budgeted expenditure on health goes to
help the smokers and victims of passive smoking.

If a tax should matter

If for one thing the excise has
to matter it should makes the role of the state more prominent in producing the
intended results. However, as mentioned these intentions are not clear. India
has a policy of promoting exports of tobacco and we are the third largest
producers of leaf tobacco in the world. There is substantial institutional
infrastructure on research and development for tobacco. On the other hand this
is also a product whose cultivation is influenced by the availability of a
large amount of pesticides and child labour. So reducing consumption of tobacco
should be preceded by certain institutional reforms and changes. But we don’t
see any hurry in any of these requirements. India has already banned smoking in
public places. The federal and state governments implemented the Cigarettes and
Other Tobacco Products (Prohibition of Advertisement and Regulation of Trade
and Commerce, Production, Supply and Distribution) Act, 2003 (COTPA) to control
smoking in public.However, the policy
has not been efficiently implemented since a complete monitoring would involve
tracking each and every smoker constantly. There are obvious challenges if
reduction in consumption is an intended result. If the state aims to reduce
consumption it would mean that the existing regulatory apparatus should strive
hard to bring the approximately 81 per cent of the looming unregistered market
(of beedi or smokeless tobacco) within legal limits.This is a daunting task considering the fact
that smoke (or no smoke tobacco) need not come from the organized industrial
units alone. On the other hand, the incentives for the state on a complete ban
of cigarettes is negligible.

A Critical Reminder on the Budget

The case of tobacco has
significant lessons for the manner in which a budget document is often read or
misread. Budgets as a policy statement has more life to it than merely being an
accounting fact to understand the difficulty at the implementation level.
Annual budgets for most laymen are interesting for the different numbers that
they toss in front of us. Some appears interesting; but very few are understood
in depth to reveal their underlying implications. But each of these figures are
dynamic and has spread effects which goes in various depths with the various
linkages that it has in the economy. For cigarettes at least, we see that the
story runs deep; imagine what the case would be for the myriad commodities
which have been included in the list. So does not the budget make a difference?
It is worth thinking about.

[2]
The increase in share value of ITC need not be restricted to its response to
excise on cigarettes alone. ITC offers a range of products and the market value
of ITC shares could also have been significantly influenced by how these
products were dealt with in the budget.